Figures from Moneyfacts.co.uk show these deals, which allow customers to pay the same fixed rate of interest on their mortgage for a set period of time, hit rock bottom in October 2017.
However, the effect of two Bank of England interest rate rises in the last year has prompted lenders to start hiking these rates.
According to Moneyfacts, anyone who took out a two-year fixed rate mortgage today would be £335 worse off a year – or nearly £28 a month – compared to those who locked into one of these deals a year ago.
However, Charlotte Nelson, finance expert at Moneyfacts, said there was still a window of opportunity for borrowers.
“It could be worse,” she explained. “Since the August rate rise, many would have expected rates to increase further, but instead they are actually falling, with the average two-year fixed mortgage rate standing at 2.49% today compared to 2.53% in August. Five-year fixed rates have also fallen by 0.02% over the same period.”
Nelson explained that lenders know, when there’s a Bank of England rate rise, borrowers will start to think about protecting themselves from future increases. Because a fixed-rate mortgage does just that job, lenders want to remain competitive and therefore like to be seen as offering the lowest rates on the market.
But, she added, that while rates are falling now, it’s unlikely they will plummet to levels seen in October 2017.
“With multiple base rate rises predicted for the foreseeable future, it is likely rates will only get higher, so borrowers looking for a fixed deal should act fast to avoid disappointment,” Nelson said.
